US Dollar Index

US exports contracted further, while imports were almost flat. Former Fed member Dudley advocated for a more aggressive rate cut, and several news articles suggest that a big rate cut is still in the works. The US Dollar Index is returning to the lower range of 100.51 after another failed rally last week. The US Dollar Index, which measures the value of the US dollar against a basket of currencies, fell further last week as markets continue to digest this week's inflation data. Expectations that the Federal Reserve may cut interest rates by 50 basis points at its meeting next week rose slightly before the weekend. The US economy remains strong and has grown more than expected. However, financial markets may have overestimated the possibility of aggressive monetary policy easing. This is evident in the high valuations of some assets. Investors should proceed with caution and consider that the economic outlook may not warrant current pricing practices. On the economic data front, US import and export prices will be released, as well as the University of Michigan consumer confidence data. However, not much volatility is expected unless the Michigan consumer confidence index is much lower than expected, which may further support a 50 basis point rate cut.

The weekly chart shows that the 14-week relative strength index (RSI) and moving average convergence divergence (MACD) indicators of the US dollar index are still in the negative zone, indicating bearish momentum. However, in the middle of last week, the index rebounded to a high of about 101.84, but its upward trend was restrained by the 7-week simple moving average of 101.93 and 102.00 (market psychological barriers). And at the end of last week, it plunged back to around 101.00. This breakthrough changed the optimistic short-term outlook in the early part of last week. The priority for buyers is to maintain the "triple bottom" composed of 100.60 (28/12/2023); 100.51 (27/8); and 100.57 (September 6 low) as the key support level. If this level faces a second test and falls, the psychological level of 100.00 will be the target, and of course there are the pressure areas of $99.57 (last July low), and $99.40 (76.4% Fibonacci retracement of 94.63 to 114.78). However, the technical indicators RSI, and MACD indicators are now showing some signs of rising, which may indicate that the trend may still be reversed. The key resistance is at 101.52 {23.6% Fibonacci retracement of 104.80 to 100.51}, and a break will re-emerge at $101.84 (last week's high), and 101.93 (7-week moving average) levels.

Consider shorting the US dollar index around 101.25 today, stop loss: 101.40, target: 100.90, 100.80

WTI crude oil

Before the weekend, WTI crude oil prices rebounded to a weekly high of around $69.35 per barrel, rebounding from the more than four-month low of $64.75 announced last Tuesday. Oil prices are rebounding on renewed hopes that the Federal Reserve will cut interest rates by 50 basis points at its upcoming meeting on September 17-18, as well as expectations of a sharp rate cut in China. WTI crude oil fell about 15% this quarter due to concerns about falling demand. The International Energy Agency said that global consumption growth in the first half of the year hit the lowest level since the epidemic. Against this backdrop, the Organization of Oil Producers OPEC+ has postponed plans to relax supply restrictions and Libyan oil production has continued to decline. Given the recent conflict in Libya and a series of geopolitical crises in recent years, the market is not without potential for gains. A large surplus is expected as non-OPEC supply growth and sluggish demand will limit the need for OPEC+ to resume supply as planned. The Federal Reserve is widely expected to start cutting interest rates at its meeting next week after signs of a slowdown in the labor market, and traders are more optimistic that policymakers will cut by 50 basis points. Lower borrowing costs are likely to support economic growth and increase energy demand.

Crude oil prices are bound to be volatile, thanks to OPEC. Still, the probability of further declines seems higher than the potential for a rebound. Oil prices still have a long way to go before they can rise back above $75. The first is the market's key psychological level of $70.00, which needs to see at least multiple consecutive closes above. Once $70.00 is back above the surface, $72.10 {August 5 low}, and $72.08 {67.79 to 87.84 78.6% Fibonacci retracement} are the first key resistance levels, followed by $73.76 {9-week MA}, and $73.86 {previous week high}. Ultimately, a recovery to $75.55 (14-week MA) is still possible. On the downside, the $64.60 level of the "triple bottom" consists of $64.45 (last March low); $64.40 (last April low); and $64.75 (this September low) should be watched. If the level faces a second test and falls, $62.34 (November 2021 low) will be the target, and of course the psychological pressure level of $60.00.

Today, consider going long on crude oil around 68.20, stop loss: 68.00; target: 69.65; 69.80

Spot gold

Last week, gold prices hit a new record high on the basis of a sharp rise in the second half of the week as traders increased bullish bets ahead of the Federal Reserve's interest rate cut this week. Gold prices rose to $2,586.10 per ounce at one point. Gold prices have risen by more than a quarter this year, driven by the Federal Reserve's monetary easing policy. Central bank purchases and strong safe-haven demand from conflicts in the Middle East and Ukraine have driven gold prices higher, while retail investors' interest is also increasing. Fed policymakers are considering whether to reduce interest rates normally by a quarter percentage point or choose to reduce them by half a percentage point. In response, gold traders are betting that precious metal prices may rise further, as lower interest rates are generally good for non-interest-bearing gold. Total open interest in Comex gold futures has increased significantly over the past few trading days, while prices have hit new highs in a row, indicating that new long positions are being established. Some investors are also looking to gold as a safe haven asset in a risk-on environment. With U.S. inflation data picking up slightly last week and a weak labor market report, investors may want to use gold to protect their wealth in the event of a recession. Investors closing out bearish bets on gold may also be one of the reasons for the rise in gold prices. The latest data shows that the total short position of fund managers in Comex gold futures reached the highest level in four weeks in the week ending September 3.

From the weekly chart, gold prices finally achieved a breakthrough to a new historical high of $2,586.10 after closing above the top of the three-week trading range, the previous record high of $2,531.70, in the middle of the week. At the same time, the current market psychological level of $2,500 continues to provide strong support for gold buyers. With the range breakout achieved, gold finally reached the symmetrical triangle target of $2,560 a month and a half ago to reach another all-time high of $2,586.10. Despite the continued rise in gold prices, the 14-week relative strength index (RSI) remains in the bullish zone and there is still more room for upside after hitting overbought. The RSI indicator is currently around 74.35. If gold prices continue its bullish momentum, the next upside hurdle will be $2,600 (the entire psychological level, and $2,613 {200% Fibonacci rebound from 2450 to 2287), exceeding this level will test the psychological price of $2,650. If gold prices pull back, the initial support is at the previous all-time high of $2,531.70, and a break will test the 5-week moving average of $2,520. Further declines will point to the $2,500.00 {market psychological barrier} level.

Consider going long on gold before 2,575.00 today, stop loss: 2,570.00; target: 2,590.00; 2,595.00

AUD/USD

AUD/USD rose for the third consecutive session late last week, with the pair managing to reverse some of its recent weakness and maintain a positive outlook, supported by its 200-day moving average of 0.6617. However, occasional strength in AUD/USD and continued concerns about China's economic outlook have challenged this optimism. On the other hand, economic data from the US strengthened the possibility that the Federal Reserve could cut interest rates by 50 basis points this week. The US Department of Labor reported that initial jobless claims rose last week as expected, exceeding the previous week's figure. In addition, US factory inflation was higher than expected, driven by rising service costs. According to the CME FedWatch tool, the market fully expects the Fed to cut interest rates by at least 25 basis points at its September meeting. The probability of a 50 basis point rate cut increased sharply to 41.0% from 14.0% a day ago. The Australian dollar was supported as Reserve Bank of Australia Governor Michelle Bullock said last week that it was too early to consider a rate cut as inflation was still too high and maintained a hawkish outlook.

From a technical perspective, the 14-day relative strength index (RSI) on the daily chart is currently in the mid-range area (51.00), indicating that both bulls and bears are not in full control of the market, and the market is in a state of ups and downs. At this stage, the 0.6700 confluence level - including the 38.2% Fibonacci rebound level of 0.6698 of the recent decline from 0.6823 to 0.6622 and the 27-day simple moving average (0.6702) - now seems to be a key point. Sustained strength above 0.6700 would set the stage for further appreciation in the near term and take the AUD/USD pair above the 0.6722 area (50% Fibonacci retracement) towards the 0.6775 {76.4% Fibonacci retracement) supply zone. A decisive break above this moving average would re-establish support for bullish traders. At that point, the spot price could accelerate towards the 0.6800 psychological barrier area and, in turn, the multi-month peak of 0.6823 reached in August. On the other hand, 0.6650 {downtrend channel midline}, and 0.6652 (100-day moving average) could be the first support areas to protect the recent downtrend. The next relevant support levels are 0.6600 (market psychological level), and 0.6598 (lower line of the downtrend channel)

Consider going long on AUD before 0.6690 today, stop loss: 0.6675; target: 0.6750; 0.6760.

GBP/USD

GBP/USD has seen good two-way price action, climbing sharply to a three-week low of 1.3002 in the first half of last week, but recovering most of the losses in the second half of the week. Sentiment around the pair is driven mainly by the dynamics of the US dollar. Market expectations of the extent of the US Federal Reserve (Fed) rate cut this week continue to dominate the US dollar. The US labor market data for August drove the dollar's recovery against its major rivals late last week, which continued into the week and weighed heavily on the GBP/USD pair. The disappointing US employment data reignited investors' concerns about a possible economic downturn and boosted safe-haven demand for the US dollar. This week is a busy one with UK inflation data ahead of an important Fed ruling and a press conference by Chairman Jerome Powell. All eyes now turn to the high-impact UK CPI inflation report and the all-important Fed and BoE policy statements, which will determine the next move for the GBP/USD pair.

GBP/USD edged slightly lower last week, down just 0.05%, as expectations grew that the Fed could cut interest rates by 50 basis points this week. The pair is trading around 1.3125 after bouncing off a low of 1.3114. GBP/USD resumes its uptrend. On the other hand, GBP/USD closed the weekend with a bearish pattern of a ten-star with a long upper shadow. Once the pair breaks below 1.3050 (lower line of the daily descending channel), and 1.3036 (38.2% Fibonacci retracement of 1.2665 to 1.3266), it will further touch 1.3005 (a trendline extending upward from the 8/8 low of 1.2665), and the weekly low of 1.3002, and buyers will step in. The 14-day relative strength index (RSI) of the technical indicator is eyeing an uptrend after stabilizing at 56.00. This paves the way for further gains in GBP/USD. If GBP/USD decisively climbs above 1.3150 (upper line of the descending channel), it will expose the psychological figure of 1.3200. Once exceeded, the next stop loss point will be the year-to-date high of 1.3266.

Today's recommendation is to go long GBP before 1.3110, stop loss: 1.3100, target: 1.3165, 1.3170

USD/JPY

USD/JPY still faced some selling pressure last week, hitting a new year-to-date low. The divergence in policy expectations between the Federal Reserve and the Bank of Japan continues to weigh heavily on the pair. Investors look to the Fed and the Bank of Japan meetings this week for new directional momentum. The divergence in policy expectations between the Fed and the Bank of Japan has led to the recent narrowing of the U.S.-Japan interest rate differential and continues to prompt the unwinding of yen carry trades. In fact, the Fed's dovish expectations pulled the yield on the benchmark 10-year U.S. government bond to its lowest level since May 2023. Meanwhile, the Japanese 10-year government bond yield also fell to a four-week low, although hawkish signals from Bank of Japan policymakers should limit the decline. Bank of Japan board member Junko Nakagawa said this week that the central bank will raise interest rates further if the economy and inflation meet its forecasts. In addition, Bank of Japan board member Naoki Tamura said on Thursday that the central bank must raise short-term interest rates to at least around 1% by fiscal 2026 to steadily achieve its 2% inflation target. This, in turn, reaffirms bets that the Bank of Japan will announce another rate hike before the end of the year, which could continue to drive flows to the yen and support the prospect of further depreciation in USD/JPY.

USD/JPY continued to fall, falling to a low of 140.28 on Friday, roughly the same level as the key low of 140.25 in December 2023, and forming a key "double bottom", where solid support is expected in the short term. The break below the August 5 low (141.69) on September 11 crossed an important threshold for bears. Coupled with the break below the major multi-year trendline in early August, this suggests that the long-term uptrend may have reversed. Such a reversal suggests that the broad bias has changed from "bullish" to "bearish". A subsequent close below the double bottom of 140.25 - 140.28 would provide more solid evidence of a long-term trend reversal. Such a breakout could take prices to the next target of 137.24 (July 2023 low). USD/JPY is showing a mild bullish convergence between price and the relative strength index (RSI). At the low of September 11 (140.71), the RSI was in the oversold zone and now even though the price has fallen lower (140.28), the RSI has not plummeted (30.20). This could be a sign that the decline lacks some bearish conviction and suggests that the risk of a correction is evolving. Estimated rebound levels are between 142.20 (130-week SMA), and 144.53 (100-week SMA), and 144.58 (50.0% Fibonacci retracement of 127.22 to 161.95) area levels.

Today, we recommend shorting the US dollar before 141.10, stop loss: 141.40; target: 140.20, 140.00

EUR/USD

The EUR/USD pair built on Thursday's gains and traded in a positive range around 1.1100 during the US trading session before the weekend. Despite the positive consumer confidence data for September, the US dollar has struggled to gain a foothold, allowing the pair to move higher. The ECB announced its second rate cut of the cycle earlier last week, and the market generally expects another rate cut before the end of the year. The latest ECB staff forecasts also include a downward revision to eurozone economic growth. While expectations of Fed easing will put the dollar at a disadvantage, unfavorable fundamentals in the eurozone may limit the upside potential of the EUR/USD going forward. And continue to see the risk of EUR/USD falling back to 1.10. As expected, the ECB cut the deposit facility rate by 25 basis points to 3.50% last week. This was a unanimous decision by the Governing Council without any controversy. At present, the ECB does not want to commit to any specific policy path. Growing doubts about growth and inflation are driving market expectations for a more aggressive easing cycle and ultimately a faster rate cut to just below neutral.

EUR/USD surged after retesting the psychological support of 1.1000, and the breakout of the weekly horizontal channel axis (1.0980) pattern formed around 1.0999 (9-week MA). The near-term outlook for the major currency pair has strengthened as it has climbed above the 9-week (1.0999), and 14-week (1.0918) moving averages. The 14-week RSI fluctuates in the 60.00 range. A break above 60.00 would trigger bullish momentum. On the upside, resistance at the previous week’s high of 1.1155 and 1.1201 (26 Aug high) would act as major hurdles for the euro bulls. A breakout would point to the 1.1275 (last July 18 high) level. On the downside, the psychological level of 1.1000 and the high of 1.0999 (9-week moving average) will be the main support areas. If it falls below the 1.1000-1.0999 level, the pair may suffer a major setback and will not have much chance before approaching the 1.0950-1.0900 USD area on July 17.

Today, it is recommended to go long on the US dollar before 1.1060, stop loss: 1.1045, target: 1.1120, 1.1130.

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